Making work pay for low-income workers

December 14, 2018

Rhode Island has fallen behind other New England states in helping workers via the Earned Income Tax Credit

After decades of wage stagnation and increasing inequality, politicians and academics of all stripes have been seeking ways of aiding workers on the lower end of the wage scale. Economic studies from Berkeley to Boston show that the Earned Income Tax credit reduces poverty and improves health and education.

Yet the maximum federal credit has remained flat since 1996. Given the gridlock in Washington, D.C. it’s probably too much to ask a divided Congress to do much about this. Congress and President Trump recently rolled out a comprehensive tax overhaul that was skewed to the wealthy. It sharply reduced estate taxes paid only by multi-millionaire families, but did little to help those supporting families while living paycheck-to-paycheck.

So the focus has turned to states that tax incomes. In New England, Massachusetts and Vermont have recently raised their state Earned Tax Credit programs. Massachusetts low-income workers are now eligible for a 30 percent credit and Vermont has bumped it up to 36 percent. Rhode is stuck at 15 percent.

Even Connecticut, a state mired in budget red ink for several years, does better than Rhode Island at 23 percent.

It’s hard to argue against cutting taxes for low-wage working families. There has never been a government welfare program that is as effective as a job – a sentiment expressed long ago by the great New Deal President Franklin Roosevelt. He created such programs as social security but disdained what he called the dole.

A job gives a person a reason to get out of bed every morning. Jobs teach responsibility and link workers to something larger than themselves. Parents who work provide role models for children. A paycheck also builds community.

Our society claims to value work, but we don’t give the working poor the opportunities they need to better support their families and live better lives. Our schools don’t provide the same education for impoverished children as they do for those from wealthier families. The poor often live in urban neighborhoods that are not as safe as suburban communities.

Another way to help hard-working but low-skilled workers is to raise the minimum wage. Again, Rhode Island lags. On New Year’s Day, the Massachusetts minimum wage will jump to $12 an hour, while Rhode is at $10.50. As Stephanie Geller, deputy director of Rhode Island Kids Count says, “we in Rhode Island are definitely falling behind our neighboring states.”

On the minimum wage, Rachel Flum, executive director of the Economic Progress Institute, says that about one of every four minimum wage workers in Rhode Island are supporting families.

Rhode Island’s record in helping poor workers isn’t all bad. The General Assembly has voted to phase out the nettlesome car tax, which hits low-income workers with older vehicles harder than the wealthy. And car taxes are higher in Rhode Island urban areas where most working families live than in coastal communities and suburbs. Getting rid of these taxes was long overdue.

The Assembly and Gov. Gina Raimondo have also enacted a law that grants free tuition at the Community College of Rhode Island. The governor seeks to expand this to the state’s two other public colleges, the University of Rhode Island and Rhode Island College.

Rhode Island does pretty well on covering poor children’s health care, particularly since the Obamacare expansion of Medicaid. The Assembly has also given workers a path to earning paid sick leave of up to four days a year.

There are many theories on forging a better economy. One path taken by many states, including Massachusetts and Rhode Island, is luring job-producing businesses through taxpayer subsidies. Some of these subsidies have merit; others don’t. Too often the politicians fall for the glitz of new companies promising jobs, a la the recent Amazon sweepstakes. This we know – a small state such as Rhode Island will never be able to afford huge subsidies.

In this season of giving, let‘s all urge the Assembly that convenes on New Year’s Day to make 2019 the year Rhode Island does better by its struggling, but hard-working citizens.

Scott MacKay’s commentary can be heard every Monday morning at 6:45 and 8:45 and at 5:44 in the afternoon. You can also follow his political analysis and reporting at our web site at ThePublic’sRadio.org

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